HARTFORD — A cut in Connecticut’s sales tax on marine vessels, set for July 1, already has begun to provide a much-needed boost to Connecticut’s boating industry, according to boat sellers.
Kathleen Burns, executive director of the Connecticut Marine Trades Association, said Wednesday that customers have been calling her office, asking if the plan to reduce the tax from 6.35 percent to 2.99 percent is real. One man told her the tax cut means his wife will now let him buy a boat — and from a Connecticut boat dealer.
“I sat there and wanted to cry, certainly tears of joy,” said Burns, who also heard from a Connecticut-based dealer who decided to increase his order for new boats because of the tax cut.
Democratic Gov. Dannel P. Malloy made it official on Tuesday, when he signed a revised state budget that reduces the state sales tax on vessels, vessel motors and trailers used for transporting boats.
Burns has been warning state lawmakers over the past several years about how Connecticut’s marine industry has taken a financial hit because nearby states have smaller or no state sales taxes on boat sales. While Rhode Island and New Hampshire don’t charge tax, New York and New Jersey placed caps on theirs. That has prompted many boat buyers to make their purchases outside of Connecticut. And Burns said they often keep their boat in those states to avoid having to pay Connecticut sales tax, creating a loss not only for the state’s coffers, but also the state’s marinas, marine services and ancillary businesses, including restaurants and gas stations.
Connecticut boat sales dropped by 9 percent, from 2016 to 2017, according to the marine trades association. There were 1,125 new boats sold in Connecticut in 2017. Ten years ago, that number was 3,021. Meanwhile, boat registrations in Connecticut dropped by 2,300 this past year. Burns said the state is on track to have lost nearly 18,000 boats since the economic recession that began around 2008.
“In the northeast, we are now the only state who lost boat registrations and saw declining sales. The only one,” Burns told the General Assembly in March. “It’s got to stop. We must find a way to compete against states who recognize what this industry can contribute to the state’s economic growth and stability.”
While advocates originally wanted lawmakers this session to eliminate the sales tax on boats, they see this reduction as a “shot in the arm,” according to veteran boat broker Hal Slater. President of Brewer Yacht Sales, which has offices in Mystic, Deep River, Westbrook, Branford and Stamford, Slater has seen a decline in brokerage sales over the last several years. Much of it, he said, is from people buying and keeping their boats in Rhode Island or New York.
But on Wednesday, Slater got a call from a client looking to buy a boat in the $185,000 to $200,000 range. The buyer told Slater he was motivated to call because of the tax cut.
“This is going to keep business here in Connecticut,” Slater said. “It’s going to increase business here in Connecticut and it’s going to obviously keep our jobs, increase our jobs. It’s actually going to create an increase in sales tax revenue that will wind up as a net gain for the state, I’m sure.”
The legislature’s nonpartisan Office of Fiscal Analysis estimates the tax reduction will create an annual revenue loss of about $2.3 million for the state’s main spending account, the general fund.